Financial Planning in the Emerging Butterfly Economy

1. Financial Planning in the Emerging Butterfly Economy Realities, Trends, and Discontinuities Thomas H. Greco, Jr. Financial Planning Association Retreat Bonita Springs, Florida May 5, 2011

2. The Future Will Not Be Like the Past RISKS IN MIRROR MAY APPEAR SMALLER THAN THEY ARE Thomas H. Greco, Jr.

3. Main Topics • Mega-crisis • Growth imperative • Debt money system • Class war • Butterfly economy • Exchange alternatives • A New Paradigm in Finance Thomas H. Greco, Jr.

4. Mega-CrisisFacing the facts • Climate Change • Greenhouse gasses > Global warming/cooling? • End of Cheap Energy • Increasing costs of production and transportation • Resource Depletion • Fresh Water, Soil fertility, Minerals, Forests, Marine resources, etc. • Pollution • Chemical,, nuclear, noise • Industrialization of the developing economies • Financial Disruption • Bankruptcies & Unemployment • Currency debasement/Inflation • Debt growth Or Thomas H. Greco, Jr.

5. Mega-CrisisMore facts • Spreading social unrest over • Price inflation in food fuel, and basic necessities • Growing unemployment and lack of economic opportunity • Growing disparities of income and wealth • Repressive government and lack of personal freedom • A growing world population • Rapidly aging populations in the developed world • General Institutional Failure Or Thomas H. Greco, Jr.

6. Exponential Growth is Killing Us "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist." --Kenneth Boulding, Economist Thomas H. Greco, Jr.

7. What is growing exponentially? Human Population 2011 world population = 6.9 billion Thomas H. Greco, Jr.

8. What is growing exponentially? Atmospheric CO2 2011 level 392 ppm Thomas H. Greco, Jr.

9. What is growing exponentially? Debt Thomas H. Greco, Jr.

10. Unsustainable Growth • The DRIVER • The money system based on lending at compound interest • The ENABLER • The ready availability of fossil fuel energy • The BRAKE • Nature Thomas H. Greco, Jr.

11. The Political Money Regime • Centralizes power and concentrates wealth • Undermines popular government • Forces artificial growth • The debt imperative >> growth imperative • Erodes the social fabric • Destroys the environment Thomas H. Greco, Jr.

12. The Growth Imperative How Compound Interest Forces Artificial Growth Thomas H. Greco, Jr.

13. The Money Machine • “The actual process of money creation takes place primarily in banks. • …checkable liabilities of banks are money. • These liabilities are customers’ accounts. • They increase.. when the proceeds of loans made by banks are credited to borrowers’ accounts.” • -- Federal Reserve Bank of Chicago Thomas H. Greco, Jr.

14. The Creation of Bank Debt-Money as Deposits Bank Banks create money in the form of “deposits” or account balances when a “loan” is granted. Account Deposit (liability) Debt Money Mortgage Note (asset) Mortgage note As interest accrues, the supply of money available for repayment becomes deficient. Thomas H. Greco, Jr.

15. As interest accrues, the supply of money available for repayment becomes deficient… …Unless more debt is created. That is why the federal budget cannot be balanced. Government becomes the Borrower of Last Resort Thomas H. Greco, Jr.

16. U.S Government Revenues minus Spending Thomas H. Greco, Jr.

17. Banks The Credit Commons Public sector “loans” Private sector “loans” “loans” Central Government The credit commons is the virtual pool of credit that enables economic exchange. In the current system, it can be accessed only by “borrowing” from banks!

18. F=(1+i)n Thomas H. Greco, Jr.

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20. Growth of One Dollar at Compound Interest Thomas H. Greco, Jr.

21. The Current Financial and Economic Environment • The political money system is shaking itself apart • Bubble-and-bust cycles are becoming ever more extreme • Explosive expansion of debt and debasement of the money Systemic Failure of Conventional Money and Banking Bubble Bust Thomas H. Greco, Jr.

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24. United States National Government Debt $14.3 trillion as of May 3, 2011 (not including guarantees)

25. Total Debt by Sector % of GDPSelected Countries Thomas H. Greco, Jr.

26. Discontinuity "This crisis ...has brought the entire [financial] system to the brink of a breakdown, and it is being contained only with the greatest difficulty. This will have far reaching consequences. It is not business as usual but the end of an era." —George Soros, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, p. 81. Thomas H. Greco, Jr.

27. Dollar DemiseAccident, Disease, or Murder? • Ever increasing U.S. budget deficits • Dollar inflation by the Fed and the banking system* • Dollar divestment by China and others • Loss of reserve currency status • Bilateral and multilateral settlement agreements • BRICS establishing mutual credit lines in own currencies • China-Russia , South American countries, etc… Thomas H. Greco, Jr.

28. Class War by the Superclass “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” —Warren Buffet , NYT, 2006 “Whether you like it or not, there is no way to deny the enormous, disproportionate, concentration of power and wealth in the hands of a relatively small number of people in the world today. ” —Richard Holbrooke, Former U.S. Ambassador to the U.N. Thomas H. Greco, Jr.

29. The “New World Order” ”The powers of financial capitalism had a far-reaching plan, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole... Their secret is that they have annexed from governments, monarchies, and republics the power to create the world's money…” - Prof. Carroll Quigley, Georgetown historian, mentor of former President Clinton, and author of Tragedy & Hope: A History of the World in Our Time, 1966 Thomas H. Greco, Jr.

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31. Systematic Destruction of the Middle-Class • Reduced incomes • Loss of jobs—unemployment and underemployment. • Low return on savings. • Increasing cost of living • Price inflation caused by dollar inflation. • Increasing cost of bank financing & services • Higher and more regressive taxes. • Destruction of savings • Dollar inflation (debasement) destroys purchasing power. • Political attack on social programs Thomas H. Greco, Jr.

32. Inflation, Deflation or Stagflation? To keep this game going, the monetary authorities have no choice but to inflate the supply of dollars. Currency Inflation >> Price Inflation Purchasing power In the wake of monetary inflation, price inflation must inevitably follow. Thomas H. Greco, Jr.

33. The Real Cost of Living Thomas H. Greco, Jr.

34. Disturbing RealitiesThe Disappearing Middle-class • The bottom 50% of income earners in the U.S. own less than 1% of the nation’s wealth. • 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans. • The ratio of executive's pay to worker's pay ~30 to 1 in 1950; now ~ 300 to 500 to one. • Squeeze on labor. A garment worker in China earns 86 cents/hour, in Cambodia 22 cents/hour. • Over 1.4 million Americans filed for personal bankruptcy in 2009, 32% more than in 2008. Thomas H. Greco, Jr.

35. Rising Income Inequality Thomas H. Greco, Jr.

36. Income Maldistribution Thomas H. Greco, Jr.

37. Wealth Distribution more unbalanced than Income Distribution (2004) Wealth Income Thomas H. Greco, Jr.

38. Tax ShiftHighest marginal income tax rates Thomas H. Greco, Jr.

39. Corporate tax as a share of GDP, 1946-2009 Thomas H. Greco, Jr.

40. Unreliable Bank Credit • The productive sector, especially SMEs, are starved for credit, while • Money is lavished on government, the financial sector, and the M-I complex. • The political money system favors the demands of • BIG banks, • BIG corporations and • BIG government. Thomas H. Greco, Jr.

41. Where is Civilization Headed? • Disintegration and collapse? • Greed, selfishness, separation • Societal Metamorphosis? Emergence of the Butterfly Society • Generosity, compassion, solidarity Thomas H. Greco, Jr.

42. The Beginning of The Butterfly Economy • METAMORPHOSIS • From • Superfluous accumulation • Violent conflict, and • Wasteful consumption • To • Sustainable conviviality Thomas H. Greco, Jr.

43. The Old World Order Based on belief in • Separateness • Scarcity • Violent conflict and competition • Command and control • Elite rule • Immutable and “sinful” human nature Favors large scale hierarchical organization and centralized control to impose order and mitigate risks Thomas H. Greco, Jr.

44. The New, “Convivial” World Order Based on belief in: • Human Unity & The Oneness of all life • “Abundant sufficiency” • Sharing, Cooperation, and Non-violence • Collective intelligence and community self-government • Potential for human improvement • Personal freedom Favors diverse, decentralized, small-scale systems and communities that enable freedom and self-expression. Thomas H. Greco, Jr.

45. The Old “Caterpillar” Economics Promoted • Continuous growth of economic output • Quantitative measures of value and well-being • Privatization and capital accumulation • Resource consumption and competition for control • Labor productivity • Growing disparities of wealth and power The Consumer Society Thomas H. Greco, Jr.

46. The New “Butterfly” Economics Promotes • Steady-state economic output • Qualitative measures of value and well-being • Restoration of the commons • Resource productivity, sharing and regeneration • More equitable distribution of wealth and power The Convivial Society Thomas H. Greco, Jr.

47. Transitions • Sustainable Development vs. Growth • Steady-state economy • Livelihood vs. Jobs • More equitable distribution vs. increasing disparities of income and wealth • Quality of Life vs. Quantity of Consumption Thomas H. Greco, Jr.

48. Credit makes the world go ‘round Thomas H. Greco, Jr.

49. The Devolution of PowerThree main arenas • Reclaiming the Credit Commons Cashless Exchange Associations & Private/Local Currencies • Shift of Savings and Investment Available resources applied to community resilience and sustainability • From Employment to Enterprise Self-employment, Diversification of skills, DIY, Make for use Cooperation * Sharing * Reorganization Thomas H. Greco, Jr.

50. Emergent Exchange Alternatives Trade Exchanges and Private alternative currencies are proliferating and well positioned to provide SMEs and local economies with • Reliable inexpensive credit and • Supplemental exchange media, • Based on the exchange of real value By monetizing the local value-added Thomas H. Greco, Jr.